Koko Networks, a Kenya-based biofuel technology company, has expanded its business to other fast-moving consumer goods through a new technology platform that will take advantage of its established distribution networks in low-income neighborhoods.
Koko Club, the new business line, sells the products directly to consumers through the dukas (small stores) that currently serve as the company’s agents for its bioethanol cooking fuel and stoves.
The Koko Club products, which are displayed in the appropriate places in the small shops of the agents, are only sold to registered Koko Club members.
The store owners (agents) use Koko’s PoS system to sign in customers, record their personal data and provide them with an electronic card that they will use when purchasing products in a Koko Club store.
The loyalty cards are linked to an e-wallet, similar to the e-wallet currently used to buy Koko’s biofuel, which can be topped up via mobile money and other technologies.
Koko Club purchases products directly from manufacturers and manages inventory through a real-time management system that prevents stockouts, in addition to accurate market analysis.
With 35 SKUs in its portfolio, Koko Club initially keeps the prices of its products competitive by shortening supply chains from manufacturer to consumer.
“We target low-income households by bringing them the benefits of better products, lower prices and convenience. This not only ensures that we always have the right product range,” Sagun Saxena, Koko Networks co-founder and chief innovation officer, told BestFitnessBands. Greg Murray is the startup’s other co-founder and CEO.
Micro-stores, which make up 80% of household retail sales in Sub-Saharan Africa, are important for delivering groceries and other household items to consumers.
These casual retailers are usually within walking distance, making them convenient for shoppers, with the added benefit of extending lines of credit to loyal buyers.
The contributions of these informal traders to economies cannot therefore be ignored, as they account for the vast majority of retail trade across the continent.
However, these stores continue to face challenges such as inventory shortages, fluctuating revenues and insufficient financing, making them difficult to grow.
These are some of the gaps that Koko Club plans to bridge, especially in the area of stockouts – as the agents don’t need capital to replenish the stocks.
Modernizing informal trade is considered one of the strategies to unlock credit and the potential of these small micro-retail businesses, and to improve the lives of small business owners. Saxena said Koko Club’s business model gives manufacturers direct access to this market segment.
“Many of these manufacturers have armies of people going out into the neighborhoods to make sure their products are properly positioned and these stores are styled. They even need people to find out what prices the retailers are selling at,” he said.
“So we arrange so much for them; we can now tell them exactly how many of their products there are and what their price tags are, and all that kind of information.”
The Koko Club idea was conceived in mid-2020, but only early this year did the startup move ahead with the launch, building on the success of its bioethanol fuel business, which was unveiled in 2019 as a cleaner, cheaper, and safer alternative to charcoal and firewood. .
Currently, more than 300,000 households use Koko’s bioethanol fuel and stove (made at Koko’s factory in India), up from about 100,000 as of March this year. These households are served by the more than 1,000 agents, who will now act as Koko Club agents.
Koko’s fuel business has expanded beyond the Kenyan capital Nairobi in just over two years after a recent launch in the coastal city of Mombasa, with plans to enter Nakuru and Kisumu in the first half of 2022.